The Charity Governance Guide: Everything You Need to Know

COURSE OVERVIEW:

I.       Organization & Start-Up

         1.    First Directors Meeting

         2.    First Members Meeting

II.      The Board of Directors

         1.    General Duties of the Board of Directors

         2.    Number of Directors

         3.    Electing the Directors

         4.    Qualifications to be a Director

         5.    Director Terms and Vacancies

        6.    Directors’ Meetings

         7.    Appointing Officers

         8.    Responsibilities and Liabilities of Directors and Officers

                     a.   Standard of Care

                     b.   Duty to Comply

                     c.   Liability

                     d.   Conflicts of Interest

                     e.   Indemnification by the Corporation

          9.    Remuneration of Directors, Officers and Members

III.       The Members

           1.    Membership

                     a.    Condition of Membership

                     b.    Classes of Membership

                     c.    Becoming and Ceasing to be a Member

                     d.    Disciplining a Member

           2.    Rights and Responsibilities of Members

                     a.    Right to Vote

                     b.    Notice of Meetings of Members

                     c.    Member Proposals

                     d.    Requisition of Meeting

                     e.    Election and Dismissal of Directors

                     f.     Approval or Confirmation of By-laws

                     g.    Access to Corporate Records

                     h.    Receive Corporation’s Financial Statements

                      i.      Approve Major or Fundamental Changes

                      j.      Immunity of Members from Liability

            3.    Members Meetings

                      a.    When to Hold Meetings and Resolutions in Writing

                      b.    Notice Requirements

                       c.    Agenda for an Annual Meeting

                      d.    Location of Annual Meeting

                      e.    Electronic Meetings and Electronic Voting

                       f.     Absentee Voting

                      g.    Quorum

                      h.    Minutes

                      i.      Special Meetings

            4.    Members Resolutions

            5.    Member Agreements

            6.    Member Remedies

            7.    Dispute Resolution

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IV.       Corporate Records and Filing Obligations

            1.    Corporate Records

            2.    Accounting Records

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I. Organization and Start Up

Once your Not-for-Profit has incorporated under the Not-for-profit Corporations Act (NFP Act), you need to establish the internal organization of the corporation.

It is advisable to retain the services of a lawyer who specializes in corporation law to ensure the corporation is properly organized and the directors understand their responsibilities. By having the corporation properly organized, you should eliminate a number of potentially serious problems in the future.

1. First Directors Meeting

After incorporation, the first directors are required to call an “organizational meeting” of the directors. The purpose of this first meeting is to organize the corporation by adopting a number of resolutions that will allow the corporation to conduct its activities and the directors to properly administer the affairs of the corporation.

Notice of Meeting:

• A minimum of five days’ notice must be given to each director listed inForm 4002 – Initial Registered Office Address and First Board of Directors.
• The notice must indicate the date, time and place of the meeting.
• Directors can waive notice of the meeting.

The directors need to consider the following essential actions at their first meeting:

• make by-laws
• maintain corporate records and issuing debt obligation certificates
• authorize the issuance of debt obligations
• appoint officers
• appoint an interim public accountans
• issue memberships
• make banking arrangements
• transact any other business.

Alternatively, the directors can sign organizing resolutions to deal with all of the above matters. This is especially suitable if the number of directors is small. If all directors sign a written record of resolutions on the above matters, then a meeting of the first directors is not necessary. A copy of the resolutions must be kept with the minutes of the meetings of directors (see Organizing Resolutions of Directors).

a. Make By-Laws

Soon after incorporation, the corporation will need to adopt a set of rules concerning the governance and operations of a corporation. These rules are set out in the by-laws of the corporation. The first directors will need to adopt “general by-laws” at the first meeting of the directors.

This process can be simplified by referring to the Model By-laws, which have been written to apply to a typical not-for-profit corporation. Corporations Canada has also developed an online interactive tool called a By-law Builder that allows you to generate the by-laws you want by choosingprovisions that meet the specific needs of your corporation from a number ofavailable options. By-laws can be modified at a later date as the needs of the corporation change.

Here is a list of the major items that typically appears in bylaws:

• who can be a member of your organization and under what conditions, how you become a member, what conditions are associated with membership, termination;
• how many directors can be on your board and how they will be chosen;
• what officers your organization will have and how they are chosen (election, term, duties, resignation, and removal);
• how your organization will call meetings;
• how many people must be present at meetings to do business (quorum);
• voting rights of members;
• who will have custody of the corporate seal and who is allowed to use it to certify your organization’s documents;
• how bylaws can be changed
• whether certain kinds of decisions require special levels of approval or consent
• providing an indemnity for the directors  

General by-laws adopted at the first meeting of the directors take effect immediately, although they are subject to confirmation at the first meeting of the members. After confirmation by the members, a copy of the by-laws must be filed with Corporations Canada within 12 months.

b. Maintain Corporate Records and Issuing Debt Obligation Certificates

The list of corporate records that are required to be kept includes registers of members, directors and officers and minutes of member and director meetings. Although there is a general requirement for the corporation to keep certain records at its registered office, it is also permissible to keep these records at another location, provided that the requirements of the NFP Act are met. At the first meeting of the directors, they will need to decide how these records are to be maintained and what rules, if any, will govern their maintenance.

c. Authorize the Issuance of Debt Obligations

If a corporation intends to issue debt obligations after incorporation (for ex., bonds, debentures, notes or other evidences of indebtedness or guarantees of a corporation), this will have to be authorized by the directors at their first meeting. Future debt obligations will also have to be authorized by the directors at future meetings.

d. Appoint officers

Officers are appointed by the directors to assist the directors and to carry out functions delegated to them. Officers should be appointed at the first meeting of the directors. Officers can be replaced at the discretion of the directors at any point in the future.

e. Appoint an Interim Public Accountant

The NFP Act contains a general requirement that the members of a corporation incorporated under the NFP Act must appoint a public accountant by ordinary resolution (that is, a simple majority of the votes cast) at each annual meeting. The NFP Act also contains rules regarding who can be appointed, and the circumstances in which such an appointment is not required. Since the power to appoint a public accountant is vested with the members, the first directors can appoint aninterim public accountant who holds office until the first meeting of the members (see Qualifications of Public Accountant).

f. Issue Memberships

One of a corporation’s first activities following incorporation is to issue memberships. A person becomes a member when a corporation admits that person as a member of the corporation and “issues” a membership in that person’s name. At the first meeting of the directors, memberships will need to be issued to qualified persons who meet the membership conditions contained in the by-laws. If the articles of incorporation provide for two or more classes or groups of members, memberships can be issued to different classes of members who meet the requirements set out in the by-laws. Additional memberships can be issued in the future.

g. Make Banking Arrangements

Once the corporation has been incorporated, it will need to choose a financial institution to meet its corporate banking needs. At their first meeting, the directors should adopt the banking resolutions that are required by the financial institution chosen; designate the signing officers for cheques; and determine the processes for conducting other banking business and authorizing signing officers.

h. Transact Other Business

Depending on the operations of the corporation, other business decisions might also have to be made at the first meeting of directors. Such decisions could include those that deal with:

• adopting corporate policies
• employing staff
• purchasing insurance coverage
• leasing premises
• purchasing real property
• adopting pre-incorporation contracts.

Depending on the nature of these decisions, some might require member approval and others might not.

2. First Members Meeting

After the organizational meeting of the first directors, an organizational meeting of the members is required. Although most of the corporation’s initial organizing business can be dealt with by the directors at their first meeting, certain matters might not be decided by the directors or might have to be confirmed by the members.

With this in mind, the first directors of a corporation must call the first members’ meeting within 18 months of the date of incorporation, that is, the effective date on the Certificate of Incorporation. This meeting is usually held immediately after the first organizational meeting of the directors.

At this meeting, the members:

• elect directors
• confirm, modify or reject the general by-laws established by the firstdirectors
• appoint a public accountant, who can be the same one appointed by thefirst directors or a different one
• adopt special by-laws, if any
• transact other business.

Similar to the first meeting of the directors, the members can also adopt these initial organizing resolutions in writing, instead of holding a members’ meeting, provided that the written resolutions are signed by all members. (See Organizing Resolutions of Members).

II. The Board of Directors

The Not-for-Profit Corporation is governed by a board of directors. The size of the board is defined in the by-laws of the corporation, within parameters established in its Articles of Incorporation.

1. General Duties of the Board of Directors

The board of directors is accountable to the members. It is responsible for managing and supervising the activities and affairs of the corporation. Generally, the directors are elected by the members, and the members are admitted by the board (in accordance with the articles and conditions set out in the by-laws).

The board can appoint one of its members to act as a managing director or a number of directors to act as acommittee of directors. It can then delegate to the managing director or the committee any of the powers of the directors (refer to section 138 of the Canada Not-for-profit Corporations Act (NFP Act)).

2. Number of Directors

Under the NFP Act, a corporation is required to specify in its articles either a fixed number of directors or a minimum and maximum number of directors (refer to subsection 7(1) of the NFP Act). When a minimum and maximum number of directors is chosen, the precise number of directors to be elected can be established from time to time by ordinary resolution of the members. The members can also delegate this power to the directors. Generally, a corporation must have at least one director. However, a soliciting corporation must have a minimum of three directors, at least two of whom must not be officers or employees of the corporation or its affiliates (refer to section 125 of the NFP Act).

If the members decide to change the number of directors within the number permitted by the articles, the members must pass an ordinary resolution and elect the required number of directors. It is then necessary to notify Corporations Canada of the change in directors by filing Form 4006 – Changes Regarding Directors (see Federal Corporation Forms) within 15 days following the change. If the members want to increase or decrease the number of directors specified in the articles or the minimum or maximum number of directors, the articles must be amended by filing Form 4004 – Articles of Amendment (see Federal Corporation Forms) and paying the fee (see Services, Fees and Processing Times – NFP Act).

3. Electing the Directors

The general rule in the NFP Act is that directors are elected by a majority of the votes cast at an annual meeting of the members, for a term that cannot exceed four years (refer to subsection 128(3) of the NFP Act and subsection 28(1) of the Canada Not-for-profit Corporations Regulations (NFP Regulations)).

There are only two exceptions to the general rule that the members must elect the directors of the corporation.

1. First, the articles can permit the directors to appoint additional directors between annual meetings to hold office for a term that must expire on or before the next annual meeting of members. This is permitted as long as the total number of appointed directors is not more than one-third of the number of directors elected at the previous annual meeting (refer to subsection 128(8) ofthe NFP Act). If the articles do not permit the directors to appoint additional directors, the articles must be amended by filing Form 4004 – Articles of Amendment (see Federal Corporation Forms) and paying the fee (see Services, Fees and Processing Times – NFP Act). For more information, refer to subsection 132(1) ofthe NFP Act.
2. The second exception allows a vacancy on the board to be filled by thedirectors, as long as there is a quorum on the board to participate in filling the vacancy (refer to section 132 of the NFP Act).

The general rule that the members must elect the directors means that it is not permissible to have exofficio directors (that is, persons who hold office “ex-officio” or “as of right”, without the need to be elected by members).

A person must consent to be a director of a corporation. Persons who have been elected or appointed as directors and are present at the meeting when the election or appointment took place, are deemed to have consented to serve as directors, unless they refuse. However, if they are not present at that meeting, they must either (a) consent to their election, in writing, before that meeting or within 10 days after that meeting or (b) act as a director after the election or appointment (refer to subsection 128(9) of the NFP Act and subsection 28(2) of the NFP Regulations).

4. Qualifications to be a Director

A director must meet all of the following qualifications (refer to subsection 126(1) of the NFP Act):

• be at least 18 years old
• not have been declared incapable under the laws of a Canadian province or territory, or by a court in a jurisdiction outside Canada
• be an individual (that is, a corporation cannot be a director)
• not be in bankrupt status.

The NFP Act contains several other provisions that deal with directors’ qualifications. For example, although the NFP Act does not require a director to be a member of the corporation, it allows the by-laws to provide otherwise (refer to subsection 126(2) of the NFP Act).

In the case of a soliciting corporation, the NFP Act provides that at least two directors must not be officers or employees of the corporation or its affiliates (refer to section 125 of the NFP Act).

Another provision of the NFP Act states that, if a corporation’s by-laws contain additional qualification requirements for directors (for ex., that each director must be a member of the corporation), these requirements must be met.

5. Directors Terms and Vacancies on the Board of Directors

The general rule in the NFP Act is that directors are elected by a majority of the votes cast at each annual meeting of members for a term that cannot exceed four years (refer to subsection 128(3) of the NFP Act and subsection 28(1) of the NFP Regulations).Therefore, the by-laws can provide a defined term of office for directors, as long as it is four years or less. The by-laws can also permit directors to hold staggered terms of office, that is, all directors elected at a meeting of members need not hold office for the same term (refer to subsection 128(4) of the NFP Act).

If a director is not elected for a stated term, that director ceases to hold office at the end of the next annual meeting of members. Furthermore, if directors are not elected at a meeting of members, the incumbent directors continue in office until their successors are elected (refer to subsections 128(5) and (6) of the NFP Act). A director whose term has expired can be re-elected as a director, as long as the by-laws do not provide otherwise.

A director’s term ends when he or she:

• dies
• resigns
• is removed from office
• is declared to be incapable by a court
• becomes a bankrupt, or
• has his or her term of office expire (refer to subsections 126(1) and 129(1), and section 130 of the NFP Act).

a. Removing a Director

From time to time and for a variety of reasons, members can decide to remove a director they had previously elected. Removing a director generally requires the approval of a majority of members who cast their votes at a meeting of members called for the purpose of removing the director. At that meeting, the members can elect another director to fill the vacancy created by the removal (refer to subsections 130(1), (2) and (3) of the NFP Act). However, where a director was elected by a class or group of members that had an exclusive right to elect him or her, the director can be removed only by an ordinary resolution of that class or group of members (refer to subsection 130(2) of the NFP Act).

If a meeting is called to remove or replace a director, that director can submit to the corporation a written statement giving reasons for opposing his or her removal or replacement as a director. The corporation will need to give notice of this statement to the members and must also file a copy of the statement with Corporations Canada (refer to section 131 of the NFP Act).

If a vacancy occurs on the board of directors, the remaining directors can continue to exercise all the powers of directors as long as the number of remaining elected directors constitutes a quorum, that is, a majority of the directors, or the minimum number of directors required at a meeting, unless otherwise specified in your corporation’s by-laws (refer to subsection 136(2) of the NFP Act).

A vacancy on the board can arise for a variety of reasons (refer to subsection 128(7) of the NFP Act), including:

• a resignation
• the removal of a director by the members
• an increase in the number, or in the minimum or maximum number, of directors provided for in the articles or
• members not electing, from among the candidates, the number of directors or the minimum of directors required by the articles, because a candidate did not consent to act as a director, did not meet the qualifications, was incapable of serving as a director, or died.

Depending on how the vacancy was created, the method of filling the vacancy can vary. Specifically:

• If a vacancy is created as a result of a director being removed from office at a meeting of the members, the members can elect another person to act as director (refer to subsection 130(3) of the NFP Act). If such a vacancy is not filled by the members at that meeting, a quorum of the directors can fill the vacancy after that meeting by appointing another person to be a director (refer to subsection 132(1) of the NFP Act).
• If there is not a quorum of the directors or if a vacancy is created as a result of an increase in the number or the minimum or maximum number of directors provided for in the articles, or a failure to elect the number or minimum number of directors provided for in the articles, the directors then in office must call a special meeting of members to fill the vacancy (refer to subsections 132(1) and (2) of the NFP Act).
• If a particular class or group of members has an exclusive right to elect one or more directors, and a vacancy occurs among those directors, it can be filled only by the remaining directors elected by that class or group (except where the vacancy resulted from an increase in the number or the minimum or maximum number of directors provided for in the articles for that class or group, or from a failure to elect the number or minimum number of directors provided for in the articles for the class or group). However, if there are no remaining directors elected by that class or group, any member of that class or group can call a meeting of the members of that class or group tofill the vacancy (refer to subsection 132(4) of the NFP Act).
• However, it is possible for the by-laws to prohibit the vacancy being filled by the directors, and to require instead that the vacancy be filled by a vote of the members, or by a vote of the members of any class or group having an exclusive right to elect one or more directors, where the vacancy occurs among the directors elected by that class or group (refer to subsection 132(5) of the NFP Act).
• If all of the directors have resigned or been removed and no replacement directors are elected, then a person who manages or supervises the activities or affairs of the corporation is deemed to be a director for the purposes of the NFP Act. However, this default rule does not apply to certain individuals, such as the corporation’s lawyer, accountant, trustee in bankruptcy, or an officer who manages the corporation under the direction or control of a member or other person (refer to subsections 130(4) and (5) of the NFP Act). If a corporation does not have any directors or members, the court can appoint the required minimum of directors provided for in the articles (refer to subsection 132(3) of the NFP Act).

Note that when there is a change of directors, the corporation must file Form 4006 – Changes Regarding Directors (see Federal Corporation Forms) with Corporations Canada within 15 days of thechange.

6. Directors’ Meetings

Most boards of directors meet on a regular basis to oversee the management andoperations of the corporation. The frequency of regular board meetings varies, depending on the needs of the corporation. Directors might also need to meet occasionally to conduct special business.

Meetings of the board can be held whenever and wherever the board wishes, unless the corporation’s by-laws or articles provide otherwise (refer to subsection 136(1) of the NFP Act).

In all cases, a quorum of directors must be present at directors’ meetings. The quorum can be set out in the articles or by-laws. If the by-laws do not specify the required quorum, a majority of the number of directors or minimum number of directors required by the articles constitutes a quorum. Despite any vacancy among the directors, a quorum of directors can exercise all of the powers of the directors (refer to subsection 136(2) of the NFP Act). If a corporation has only one director, that director can constitute a meeting (refer to subsection 136(6) of the NFP Act).

If a director is absent from a board meeting, it is not permissible for another person to act in his or her stead at the meeting. In other words, an absentee director cannot appoint a proxy or nominee to attend the board meeting (refer to subsection 126(3) of the NFP Act). This should not be confused with the ability of members to appoint proxy holders to attend members’ meetings, if proxy voting is permitted under the by-laws.

Notice of board meetings must be provided to the directors according to the by-laws. However, the notice need not specify the purpose of or the business to be transacted at the meeting unless the meeting:

• involves a matter that requires member approval
• fills the vacancy of a director or public accountant
• appoints additional directors
• issues debt obligations
• approves financial statements
• adopts, amends or repeals by-laws, or
• establishes members’ contributions or dues (refer to subsections 136(1), 136(3) and 138(2) of the NFP Act).

Directors can conduct business through signed resolutions instead of holding meetings,provided that the resolutions are signed by all directors. These signed resolutions have the same effect as they would have if they were adopted at a meeting of the board of directors (refer to subsection 140(1) of the NFP Act; there are currently no regulations). This way of conducting the business of the corporation can be very useful for small corporations with only one or a few directors.

It is also possible for one or more directors to participate in a meeting by telephone or electronically, as long as the corporation’s by-laws permit it and all participants in the meeting can communicate fully. The method of holding these meetings would also have to comply with any detailed requirements set out in the NFP Regulations (refer to subsection 136(7) of the NFP Act). At this time, no regulations dealing with such requirements have been made.

It is possible for the by-laws to include a provision allowing the directors to make decisions by consensus, even when the NFP Act otherwise requires a vote. Such by-laws must not only provide a clear definition of what is meant by “consensus”, but they must also explain how to determine when a consensus cannot be reached. A decision made by consensus is deemed to satisfy any requirement under the NFP Act for the taking of a vote. However, if the board cannot reach a consensus, the by-laws must contain a process for referring such matters to a vote (refer to section 137 of the NFP Act).

7. Appointing Officers

Officers are appointed by the directors to assist the directors and to carry out certain specified functions. Officers can occupy any position that the board wants them to fill (for ex., president, secretary or any other position). It is important to note that the NFP Act defines “officer” to include any individual so appointed by the board, as well as the following persons: the chairperson of the board of directors; the president; a vice-president; the secretary; the treasurer; the comptroller; the general counsel; the general manager; a managing director; or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any of those offices (refer tosubsection 2(1) of the NFP Act).

Not only can the board appoint any director or member to be an officer, but the board can also appointa person who is not a member or director of the corporation to be an officer. Two or more offices can be held by the same person (refer to section 142 of the NFP Act).

8. Responsibilities and Liabilities of Directors and Officers

The law imposes a wide range of duties and liabilities on directors and officers because the scope of authority of the corporation’s management is very broad. In general, these duties and liabilities reflect the position of trust that directors and officers hold in relation to the corporation and its members. While many of the duties and liabilities of directors and officers are prescribed under the NFP Act, others are set out in other federal, provincialand territorial statutes.

For example, under the Income Tax Act, directors are jointly and severally liable to pay employee income tax deductions that the corporation fails to remit for two years following ceasing to be a director. In another example, under the Canadian Environmental Protection Act, 1999 (CEPA), directors are required to take reasonable care to ensure that the corporation complies with the provisions of the CEPA dealing with air and water pollution, as well as with those involving proper storage and disposal of toxic substances.

a. Standard of Care

Directors and officers are required to exercise at least the level of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. They are also required to act honestly, in good faith and in the best interests of the corporation, rather than in their own personal interest.

This is known as an objective standard of care. In other words, when a court must determine whether adirector or officer has breached his or her duty to the corporation, it will test the person’s actions against those of a reasonably prudent person.

This is a lower standard than the common law subjective standard of care, which tests a person’s actions against what can reasonably be expected from a person of his or her knowledge and experience that applies under the Canada Corporations Act.

In meeting an objective standard of care, directors and officers can rely in good faith on reports prepared by professionals. Directors (but not officers) can also rely on the corporation’s financial statements prepared by the corporation’s public accountant (refer to subsections 148(1), 149(1) and (2), and 150(1) and (2) of the NFP Act).

b. Duty to Comply

Directors and officers are required to comply with the NFP Act and its regulations, the articles, the by-laws and any unanimous member agreement (refer to subsection 148(2) of the NFP Act). Directors are also subject to additional duties under the NFP Act. For example, directors are required to remain informed about the corporation’s activities and to ensure the lawfulness of the articles and the purpose of the corporation (refer to subsection 148(3) of the NFP Act).

c. Liability

As part of the role they play in the corporation,directors bear a degree of financial responsibility for their decisions andactions. For example, a director who votes for or consents to a resolutionauthorizing any of the following is liable to repay the corporation any moneyor other property so paid or distributed:

• a payment or distribution to a member, a director or an officer contrary to the NFP Act, or
• a payment of an indemnity, that is, an obligation to pay for any loss or damage that has been or might be incurred by another individual, contrary to the NFP Act (refer to section 145 of the NFP Act).

In addition, where a corporation encounters financial difficulties, its directors are liable to the employees for up to six months of unpaid wages while they are directors and for the two years after their directorships end (refer to section 146 of the NFP Act).

d. Conflicts of Interest

One of the basic aims of the NFP Act is to prevent conflicts between the interests of the corporation and those of the directors or officers. For example, directors and officers must disclose in writing any personal interest they might have in a material contract with the corporation. If a director or officer fails to make such a disclosure, the corporation or a member can apply to a court to request that the contract be set aside and that the director or the officer repay any profits or gains realized from the contract (refer to section 141 of the NFP Act).

e. Indemnification by the Corporation

A corporation might want to consider putting in place some of the following methods to protect (indemnify) directors and officers of corporations from certain liabilities that could be imposed upon them. For example, a corporation could:

• purchase insurance to protect directors and officers against liabilities incurred in the exercise of their duties (often called D&O Insurance)
• agree to compensate directors and officers for losses they might suffer or costs they might incur while carrying out their duties, except if the director or officer has failed to act honestly and, in the corporation’s, best interests, or
• advance funds to directors and officers to help them pay the costs of defending themselves in legal actions brought against them (refer to section 151 of the NFP Act).

It is not permissible for a contract, the articles, by-laws or a resolution to relieve a director or officer from the duty to act in accordance with the NFP Act or the regulations, or to relieve them from liability for a breach of the NFP Act or the regulations (refer to subsection 148(4) of the NFP Act).

However, members of a non-soliciting corporation can enter into a unanimous member agreement to transfer some or all of a specific director’s responsibilities and powers to one or more members. In such a case, since the director’s power or powers have been transferred away, he or she would not be held responsible for not exercising that power (refer to subsection 170(5) of the NFP Act).

9. Remuneration of Directors, Officers and Members

The directors of a corporation are entitled to fix reasonable levels of remuneration for the directors, officers and employees of a corporation, unless the corporation’s articles or by-laws provide for a different arrangement. The NFP Act also specifically permits a director, officer or member to receive reasonable remuneration and expenses for any services to the corporation that are performed in any other capacity (for ex., in the capacity of a consultant to the corporation).

In the case of a corporation that is a registered charity under the Income Tax Act, it is important to be aware that certain provinces prohibit the payment of remuneration to directors, whether as a director or in any other capacity. This is because of an inherent conflict of interest between the interests of the director and the interests of the corporation. If the corporation is a registered charity, it is important to look into the laws of the province or territory in which the charity operates to determine if such a restriction applies.

III. The Members

A member of a corporation is a person who has been admitted into membership in the corporation and who has a number of rights by virtue of membership in the corporation.

1. Membership

People who become members of a corporation are collectively referred to as the membership of the corporation. A corporation’s articles establish the classes of membership, while the corporation’s by-laws establish the conditions for the classes of membership.

a. Conditions of Membership

The articles are required to set out the classes, or regional or other groups, of members that the corporation is authorized to have. In addition, if there are two or more classes of membership, the voting rights attached to each of the classes must also be explained.

The by-laws must set out the conditions required for being a member of the classes described in the articles. Note that this information can instead be in the articles. Conditions of membership express the corporation’s requirements for issuing a membership in a particular class (that is, admitting someone as a member of the corporation). Membership conditions can be broad in nature, such as having a class of members open to all persons who have donated to the corporation. Conditions can also be restrictive in nature, such as having a class of members who are limited to the board of directors of the corporation, the board of directors of another corporation, or even one named person or corporation. The conditions of membership should establish whether or not a body corporate can be a member.

b. Classes of Membership and How to Change Classes and Members’ Rights

The articles set out the classes or groups of members and their voting rights. A corporation can have only one class of members, in which case, all members are voting members. Alternatively, a corporation can have two or more classes of members, as long as the articles give the right to vote to at least one class.

If the directors wish to change the classes described in the articles, or the voting rights attached to a class of members, an amendment to the articles of the corporation and, in some cases, to the by-laws of the corporation will be required. In either situation, a special resolution of the members is needed. It should be noted that, in certain circumstances involving changes to membership classes and voting privileges, the members of a class or group of members can be entitled to vote separately as a class or group.

c. Becoming and Ceasing to be a Member

Membership in a corporation is issued in accordance with the requirements of the articles and by-laws. The first members of a corporation are usually approved by resolution passed by the directors at their first meeting. Initial members will be admitted at that meeting, and new members can then be admitted afterwards, from time to time. It is also possible for the directors to delegate the authority for issuing memberships to a committee or officer of the corporation.

Unless the by-laws or articles say otherwise, a member will cease to hold a membership in a corporation if:

• the member dies
• the member resigns
• the member is expelled or their membership is terminated in accordancewith the articles or by-laws
• the member’s term of membership expires, or
• the corporation is liquidated and dissolved under the CanadaNot-for-profit Corporations Act (NFP Act).

d. Disciplining a Member

The NFP Act specifically allows the articles or by-laws of a corporation to give the power to discipline a member or to terminate their membership to the directors, the members, or any committee of directors or members. However, if the articles or by-laws provide for this power, they must also set out the circumstances and the manner in which the power can be exercised. This means that either the articles or the by-laws must prescribe the process to be followed to terminate a membership or discipline amember, including matters such as:

• notice to the member
• whether the member will be given the right to be heard or provide submissions
• how the decision to terminate or discipline is to be made by the corporation
• whether the decision is final and binding on the member or is subject to appeal.

2. Rights and Responsibilities of Members

The members of a corporation have certain rights and responsibilities under the NFP Act.

a. Right to Vote, and Class or other Group Votes

The classes of membership described in the articles can be voting or non-voting. If the articles provide for two or more classes of members, the articles must provide the members of at least one class with the right to vote at a meeting of members. In other words, it is not permissible for a corporation to have no voting members.

Unless the articles provide otherwise, each member is entitled to one vote at a meeting of members. The members of a corporation that has only one class of members have the right to vote at any meeting of the members.

If a corporation has more than one class of members, the members of each class will have certain built-in protections. The NFP Act provides that the members of a class are entitled to vote separately as a class on a proposal to make certain amendments to the articles and by-laws of a corporation (refer to subsection 199(1) of the NFP Act). These amendments are those that:

a)    exchange, reclassify or cancel all or part of the memberships of a particular class

b)    add, change or remove rights or conditions attaching to memberships of a particular class (including reductionor removal of a liquidation preference) or add, remove or change prejudicially voting or transfer rights of a particular class

c)    increase the rights of any other class having equal or superior rights to those of a particular class

d)    increase the rights of a class of members having rights inferior to those of a particular class to make the inferior class equal to or superior to the particular class

e)    create a new class having rights equal to or superior to those of a particular class

f)     exchange or create a right of exchange of all or part of the memberships of another class into memberships of a particular class.

Sections (a) and (e) are optional and the articles can provide that these rights do not apply to certain membership classes of acorporation. If this option is chosen, it means that, for example, undersection (a) other classes of members could cancel a particular class of members without the approval of the class of members being cancelled. Under section(e), it means that new classes of members with equal or superior rights to anaffected class can be added to the articles without the approval of the affected class.

All of the other changes referred to above in sections (b), (c), (d) and (f) provide specific class protections (which cannot be removed in the articles) that allow each class to vote separately as a class concerning the matters referred to in those sections. This right to have a separate class vote applies even where a particular class does not otherwise carry a right to vote in the articles.

Separate class votes are also provided in the NFP Act with respect to the approval of fundamental changes, such as amalgamation or continuance.

b. Notice of Meetings of Members

Notices of meetings of members must be provided inaccordance with the by-laws to the following persons:

• each member entitled to vote
• each director
• the public accountant of the corporation.

Members who are entitled to receive notice are those who appear in the members register on a certain date called the “record date.” The directors can fix, by resolution, a record date that is not more than 60 days and not less than 21 days before the meeting. If the directors do not take this action, then the NFP Act provides that the record date is the close of business on the day immediately preceding the day on which notice is given or, if no notice is given, the day on which the meeting is (refer to section 161 of the NFP Act).

The provisions of the by-laws that deal with the giving of notice must comply with the Canada Not-for-Profit Corporation Regulations (NFP Regulations). The NFP Regulations provide minimum and maximum notice periods for meetings and require that the by-laws specify one or more of the following means of giving notice:

• by mail, courier or personal delivery to each member entitled to vote at the meeting during a period of 21 to 60 days before the meeting
• by telephonic, electronic or other communication facility to each member entitled to vote at the meeting during a period of 21 to 35 days before the meeting
• by affixing the notice, no later than 30 days before the meeting, to a notice board where information about the corporation’s activities is regularly posted in a location that is frequented by the members
• if the corporation has more than 250 members, by publication using one of the following two means: (a) at least once in each of the three weeks immediately before the meeting is to be held in one or more newspapers circulated in the municipalities in which the majority of the members reside as shown by their addresses in the register of members, or (b) at least once in a publication of the corporation that is sent to all its members, during the period of 21 to 60 days before the day on which the meeting is to be held.

If the provisions of the by-laws do not comply with the above requirements, or if no method is provided for in the by-laws, the notice must be mailed or personally delivered to the members 21 to 60 days before the day on which the meeting is to be (refer to subsections 162(2) and 272(1) of the NFP Act).

c. Member Proposals

Generally, the directors are responsible for setting the agenda of members meetings. However, members have a right to add items to the agenda by submitting a notice – known as a “proposal” – to the corporation 90 to 150 days before the anniversary of the previous annual meeting of members. In this regard, any member entitled to vote at an annual meeting of members can submit a proposal to the corporation about any matter that the member wishes to raise at the meeting of members (refer to subsection 163(1) of the NFP Act). This includes the right of a voting member to submit a proposal to make, amend or repeal by-laws.

If a proposal includes nominations for the election of directors, the NFP Act states that the proposal must be signed by at least 5% of the members entitled to vote at the annual meeting. However, the NFP Act also permits the corporation to use its by-laws to lower this percentage (for ex., at least 2%), but not to raise it.

With few exceptions, the corporation is required to include the proposal in the notice of meeting that is sent to the members (refer to subsection 163(6) of the NFP Act). If requested by the member who submits a proposal, the corporation is required to include in the notice of meeting a statement by the member in support of the proposal and the name and address of the member. The NFP Regulations provide that the statement and proposal shall not exceed 500 words in total.

The member who submitted the proposal is required to pay any cost of including the proposal and statement in the notice of meeting unless it is otherwise provided in the by-laws or in an ordinary resolution of the members present at the meeting.

It should be noted that directors are not obliged to include the proposal if:

(a) the submission of the proposal does not meet the requirements above or

(b) the proposal is improper, in that:

• it is intended to enforce a personal claim or redress a personal grievance against the corporation, or its directors, officers, members or debt obligation holders
• it does not relate in a significant way to the activities or affairs of the corporation
• the member failed, not more than two years before the receipt of the proposal, to raise the matter covered by the proposal at a meeting of members
• it is substantially the same as a proposal previously submitted to members less than five years ago and it did not receive the minimum required support (refer to the paragraph below) at that meeting, or
• the rights to submit proposals are being abused to secure publicity.

Section 68 of the NFP Regulations provides that the prescribed minimum amount of support is:

• 3% of the total number of memberships voted, if the proposal was raised at one annual meeting of members
• 6% of the total number of memberships voted at its last submission to members, if the proposal was raised at two annual meetings of members
• 10% of the total number of memberships voted at its last submission to members, if the proposal was raised at three or more annual meetings of members.

d. Requisition of Meeting

The directors are responsible for calling annual and special meetings of members, but members who hold at least 5% of the voting rights can require the directors to call a meeting of members (subsection 167(1) of the NFP Act allows the by-laws to stipulate a lower percentage of voting members).

This is called a “requisition.” The requisition (which can consist of several documents, each signed by one or more members) must state the business to be transacted at the meeting and must be sent to each director and to the registered office of the corporation.

If the directors fail to call a meeting within 21 days of receiving the requisition, any member who signed the requisition can call a meeting and the corporation must reimburse the member for the cost of doing so.

It should be noted that directors are not obliged to call a meeting if:

(a) the directors have already established a record date for determining members entitled to receive notice of a meeting of members (that is, the directors have already started the process to call a members meeting)

(b) the directors have already called a meeting, or

(c) the business stated in the requisition is improper in that:

• it is intended to enforce a personal claim or redress a personal grievance against the corporation, or its directors, officers, members or debt obligation holders
• it does not relate in a significant way to the activities or affairs of the corporation
• the member failed, not more than two years before the receipt of the proposal, to raise the matter covered by the proposal at a meeting of members
• it is substantially the same as a proposal previously submitted to members less than five years ago and it did not receive the minimum required support (refer to the paragraph below) at that meeting, or
• the rights to submit proposals are being abused to secure publicity.

Section 68 of the NFP Regulations provides that the prescribed minimum amount of support is:

• 3% of the total number of memberships voted, if the proposal was raised at one annual meeting of members
• 6% of the total number of memberships voted at its last submission to members, if the proposal was raised at two annual meetings of members
• 10% of the total number of memberships voted at its last submission to members, if the proposal was raised at three or more annual meetings of members.

e. Election and Dismissal of Directors

The first directors listed in the notice of directors filed with the articles of incorporation hold office until the first meeting of members, which must be held within 18 months of incorporation.

At the first meeting of members, and at each subsequent annual meeting where an election of directors is required under the by-laws, the members must elect directors. Election of directors is by ordinary resolution, unless the articles require otherwise (refer to subsection 7(4) of the NFP Act).

Members can also remove directors and fill vacancies on the board.

f. Approval or Confirmation of By-laws and By-law Amendments

Generally, the NFP Act requires that by-law amendments be made by the directors, subject to later confirmation by ordinary resolution of the members. By-laws and their amendments are generally effective immediately upon board approval but cease to be effective if not confirmed by the members at their next meeting (refer to section 152 of the NFP Act).

Certain “special by-laws” require a special resolution of members. These by-law amendments are effective immediately upon passage of the special resolution of members. If the subject matter of the by-law amendments addresses the matters referred to in Right to vote, and classor other group votes, approval of these special by-law amendments will require a separate class vote (refer to subsection 199(1) of the NFP Act). Where a separate class vote is required, members of a class who do not otherwise have the right to vote are also permitted to vote separately as a class.

g. Access to Corporate Records

A corporation is obliged to keep certain corporate records at its registered office or at some other location in Canada established by the board of directors (refer to subsection 21(1) of the NFP Act).

A member, a member’s personal representative, and any creditor of a corporation can examine and take extracts from these records, with the exception of the register of members. Any such person who wishes to examine the debt obligation register of a corporation must first make a request to the corporation, its agent or other designated representative accompanied by a statutory declaration (see the paragraph below). If the member wishes to examine a corporation’s register of members or obtain a list of members, additional requirements must be met.

Subsection 22(5) of the NFP Act requires the statutory declaration to state the name and address of the applicant and, if the applicant is a corporation, its address for service. It must also state that the list of debt obligation holders or the information contained in the debt obligation register will not be used except as required by subsection (7) inconnection with: (a) an effort to influence the voting of debt obligation holders of the corporation; (b) an offer to acquire debt obligations of the corporation; or (c) any other matter relating to the debt obligations or affairs of the corporation.

A reasonable fee can be charged by the corporation for extracts except that a member is entitled, on request and without charge, to one copy of the articles and by-laws, any amendments to them, and any unanimous member agreement. Any examination of corporate records must take place during the corporation’s regular business hours.

h. Receive Corporation’s Financial Statements and Public Accountant’s Report

Directors are required to provide the members with the corporation’s financial statements, including the public accountant’s report, before every annual meeting. The comparative financial statements must be prepared in accordance with the generally accepted accounting principles set out in the CPA Canada Handbook – Accounting or the CPA Canada Public Sector Accounting Handbook. Furthermore, the financial statements must consist of the following statements:

• a statement of financial position or a balance sheet
• a statement of comprehensive income or a statement of retained earnings
• a statement of changes in equity or an income statement
• a statement of cash flows or a statement of changes in financial position (refer to section 172 of the NFP Act, and sections 75 and 79 of the NFP Regulations).

It is possible for a corporation to apply to Corporations Canada for relief from these requirements in certain circumstances.

A corporation is required to send a copy or a summary of the financial statements or a copy of a publication of the corporation containing the financial information or a summary of such information to each member not less than 21 days but not more than 60 days before the annual meeting of members or before the day on which a resolution in writing is signed by the members. If a summary of the information is provided to the members, the corporation must tell the members how to access a full copy of the documents free of charge (refer to subsection 175(1) of the NFP Act).

If the by-laws specifically permit, instead of sending the financial statements to each member, the corporation can provide notice to the members that the financial statements are available at the registered office of the corporation and that any member can obtain a free copy in person or by pre-paid mail (refer to subsection 175(2) of the NFP Act). If the members consent in writing, the corporation can post the information on its website and notify the members in writing of the availability of the documents on its website (refer to subsections 266(1) and (2) of the NFP Act, and section 10 ofthe NFP Regulations).

i. Approve Major or Fundamental Changes

In most cases, fundamental changes (for ex., continuance, amalgamation, amendments to articles) require approval by special resolution of the members and sometimes by separate class votes. Information on amendments to articles is provided in Right to Vote, and Class or Other Group Votes.

j. Immunity of Members from Liability

Members of a corporation are not liable for anyliability (for ex., debts) of the corporation caused by any act or default of the corporation (refer to subsection 36(1) of the NFP Act). However, if a member is also involved in the corporation in a different capacity, for example as a director, officer or employee, the member would not be immune from aliability that might arise from those capacities.

3. Members Meetings

Annual meetings include the following items of business: considerations of the financial statements, receipt of report from the public accountant, the appointment of a public accountant and election of directors. Special meetings include other items of business than those found in annual members meetings.

a. When to Hold Meetings and Resolutions in Writing

A corporation is required to hold a members’ meeting within 18 months of the date on which the corporation comes into existence (refer to section 160 of the NFP Act). After that, annual meetings must be held no later than 15 months from the last preceding annual meeting and in any event not later than 6 months after its preceding financial year end.

Alternatively, the members can sign a resolution in writing instead of holding a meeting. A properly signed resolution in writing is just as valid as if it had been passed at a meeting of members (refer to section 166 of the NFP Act). A resolution in writing must be signed by all members who would have been entitled to vote at the annual meeting and must be retained in the corporation’s records.

It should be noted that the members cannot sign a resolution in writing instead of holding a meeting if a meeting has been called to replace:

• a director and the director has provided a written statement (refer to subsection 133(1) of the NFP Act) explaining his/her resignation or opposition to being removed, or
• the public accountant and the public accountant has provided a written statement (refer to subsection 187(4) of the NFP Act) explaining his/her resignation or opposition to being removed.

A resolution in writing is particularly useful for small membership corporations. The date of the meeting or the resolution in writing (if a meeting is not held) must be indicated on the corporation’s annual return.

b. Notice Requirements

A corporation is required to provide notice to the members of the time, date and place of an annual meeting in accordance with its by-laws (refer to subsection 162(1) of the NFP Act). The provisions of theby-laws relating to notice must comply with the NFP Act and the NFP Regulations (that is, they must set out one or more of the notice options that are in the NFP Regulations). The options for giving notice are: 

• by mail, courier or personal delivery to each member entitled to vote at the meeting during a period of 21 to 60 days before the meeting
• by telephonic, electronic or other communication facility to each member entitled to vote at the meeting during a period of 21 to 35 days before the meeting
• by affixing the notice, no later than 30 days before the meeting, to a notice board where information about the corporation’s activities is regularly posted in a location that is frequented by the members
• if the corporation has more than 250 members, by publication using one of the following two means: (a) at least once in each of the three weeks immediately before the meeting is to be held in one or more newspapers circulated in the municipalities in which the majority of the members reside as shown by their addresses in the register of members, or (b) at least once in a publication of the corporation that is sent to all its members, during the period of 21 to 60 days before the day on which the meeting is to be held.

If the provisions of the by-laws do not comply with the above requirements, or if no method is provided for in the by-laws, the notice must be mailed or personally delivered to the members 21 to 60 days before the day on which the meeting is to be held (refer to subsection 162(2) and 272(1) of the NFP Act).

If the by-laws provide for an electronic means of giving notice, they must also provide for a non-electronic alternative means of giving notice to ensure that everyone who is entitled to vote can receive notice of the meeting.

c. Agenda for an Annual Meeting

The agenda for an annual meeting, which should be included with the notice of meeting sent to members, should include thefollowing items:

• consideration of the financial statements
• receipt of report from the public accountant
• appointment of a public accountant (or, in the case of a designated corporation, a resolution of the members to dispense with the appointment of a public accountant)
• election of directors.

The directors can also include other items of business on the agenda. Examples of other items of business include such matters as general by-law amendments that require confirmation by the members; articles of amendment; or other similar changes.

d. Location of Annual Meeting

The annual meeting of members must be held in Canada at a place specified in the by-laws or, if the by-laws do not contain such a provision, at a place that the directors determine. An annual meeting can be held outside of Canada only if permitted by the corporation’s articles or if all of the members entitled to vote at the meeting agree (refer to subsections 159(1), (2) and (3) of the NFP Act).

e. Electronic Meetings and Electronic Voting

Unless otherwise provided by the by-laws, any person entitled to attend a meeting of members can attend the meeting by using a telephonic, electronic or other communication facility. The communications system used must permit all participants to communicate adequately with each other during the meeting. In such a case, the corporation must make these facilities available (refer to subsections 159(4) and (5) of the NFP Act).

If the directors or members intend to call a meeting under the NFP Act, they can decide that the meeting should be held entirely by using a telephonic, electronic or other communication facility, as long as the by-laws specifically allow the use of such communications systems. The communications system used must permit all participants to communicate adequately with each other during the meeting.

f. Absentee Voting

The by-laws can allow members to vote at meetings of members, even when they are not physically present at the meeting. This is known as “absentee voting” (refer to subsection 171(1) of the NFP Act). If a corporation wishes to permit its members to vote by absentee voting, its by-laws must include an option or options allowing members to vote selected from those permitted under the NFP Act. The types of absentee voting permitted under the NFP Act are:

• voting by proxy
• voting by mailed-in ballots
• voting by means of a telephonic, electronic or other communicationfacility.

 If the by-laws include one of the above methods of absentee voting, they must also set out the procedures for collecting, counting and reporting the results of any vote.

g. Quorum

A quorum of members must be present in order to make decisions at annual or special meetings of members (refer to subsections 159(4) and (5) of the NFP Act). Without a quorum, any business carried out at ameeting is not binding on the corporation. The by-laws of a corporation usually contain the quorum requirement which must be a fixed number of members, a percentage of members, or a percentage of members that is determinable by a formula. If the by-laws are silent on the subject, then a quorum is a majority of the members entitled to vote at the meeting (refer to section 164 of the NFP Act and section 70 of the NFP Regulations).

h. Minutes

The corporation must keep a written record of each meeting of members and any committee of members. This written record is referred to as the “minutes” of the meeting. The minutes of meetings should be kept in the corporation’s minute book (that is, a book or other device where the minutes and resolutions of the corporation are recorded). Minutes of meetings usually include the following information (refer to section 21 of the NFP Act):

• where and when the meeting was held
• who attended
• the results of any voting in the form of resolutions.

In addition, the corporation must keep any resolutions of members and of any committee of members in the corporation’s minute book.

i. Special Meetings

Special meetings of members can also be called by the directors to make decisions concerning special business. Special business is generally considered to be any business other than the annual business to be transacted at an annual meeting of members. For example, special business can include the approval of a fundamental change such as amalgamation. If an annual meeting includes special business, it is called an “annual and special meeting of members”.

Whenever special business is included on the agenda of a meeting, the notice of the meeting must state the nature of that business in sufficient detail to permit a member to form a reasoned judgment on the business, and also state the text of any special resolution to be submitted to the meeting.

4. Members Resolutions

Members make decisions by voting on resolutions, which can either be passed at members’ meetings or adopted by signing written resolutions instead of holding meetings. Decisions can be made by ordinary, special or unanimous resolutions or by consensus decision-making. The articles can also require a greater number of members’ votes to make a decision than are required by the NFP Act (refer to subsection 7(4) of the NFP Act).

Ordinary resolutions require a simple majority of votes cast by the member sentitled to vote and who are in attendance at a meeting to be adopted. For example, the election of directors is a decision that is usually made by ordinary resolution.

Special resolutions require the approval of two-thirds (2/3) of the votes cast by the members entitled to vote and who are in attendance at a meeting to be adopted. For example, fundamental changes such as a malgamation and continuance require special resolutions.

Unanimous resolutions require the approval of all the votes cast by members entitled to vote to be adopted. For example, the members of a designated corporation can pass a resolution to dispense with the appointment of a public accountant as long as the resolution is consented to by all of the members thatare entitled to vote at the annual meeting.

If there are two or more classes or groups of members, the members of each class can be entitled to vote separately as a class to pass ordinary or special resolutions to approve certain matters that specifically affect that class or group.

It is possible for the by-laws to include a provision allowing the members to make decisions by consensus, even in cases where the NFP Act requires a vote. This does not apply, however, to a vote by members of a designated corporation not to appointa public accountant, or to situations where a special resolution is required. It is important for such by-laws to clearly define what is meant by “consensus”, and how to determine when a consensus cannot be reached. A decision made by consensus is deemed to satisfy any requirement under the NFP Act for the taking of a vote. However, if the members cannot reach a consensus, the by-laws must establish a process for referring such matters to a vote (refer to section 137 of the NFP Act).

In most cases, a resolution in writing signed by the members entitled to vote on that resolution at ameeting of members is as valid as if it had been passed at a meeting of members. A resolution in writing requires the signatures of all of the voting members of the corporation (refer to section 166 of the NFP Act).

5. Member Agreements

Voting members of a corporation might wish to enter into an agreement on how they will vote on certain issues. For example, if there are three individuals who are the voting members, they could agree to vote so that all three are elected as directors.

Voting members of acorporation can also enter into a unanimous member agreement that permits decision-making power to be transferred from the directors to the members, as long as the corporation is not a soliciting corporation under the NFP Act (refer to section 170 of the NFP Act). A unanimous member agreement is most useful when a corporation has few members, since it can serve to dispense with the formal division of powers between directors and members by moving all decision-making to the membership level.

If a non-soliciting corporation has only one member, a written declaration of the sole member transferring the powers of the directors to that member is valid under the NFP Act.

6. Member Remedies

A remedy is a way for a member to ask a court to enforce a right or to address a problem with a corporation. Listed below are the remedies available to members under the NFP Act:

a. Oppression Remedy – A complainant (which includes a member or former member) can apply for an oppression remedy on the basis that any act or omission of the corporation, or the exercise of the powers of the directors or officers of the corporation, is oppressive or unfairly prejudicial or unfairly disregards the interests of the member (refer to section 253 of the NFP Act). The court can make any order it thinks fit, including an order:

• appointing directors in place of or in addition to the directors then in office
• directing a corporation or any other person to pay a member all or part of the amount that the member paid for their membership
• compensating an aggrieved person.

Note: The oppression remedy is not available to religious corporations that are successful in advancing a “faith-based defense” (that is, if the court is satisfied that the corporation is a religious corporation, that the conduct in question is based on a tenet of faith held by the members of the corporation and that it was reasonable to base the conduct on a tenet of faith, having regard to the activities of the corporation (refer to subsection 253(2) of the NFP Act).

b. Derivative Action – A member can apply to the court for an order allowing the member to bring an action in the name of and on behalf of a corporation or to intervene in an action to which the corporation is party (refer to section 251 of the NFP Act). This remedy is not available to religious corporations that are successful in advancing a “faith-based defense” (refer to subsection 251(3) of the NFP Act).

c. Compliance or Restraining Order – A member can apply to a court for a compliance or restraining order (refer to section 259 ofthe NFP Act):

• directing the corporation or any director, officer, employee, agent or mandatary (see the note below), public accountant, trustee, receiver, receiver-manager, sequestrator (see the note below) or liquidator of a corporation to comply with the NFP Act, the NFP Regulations, the corporation’s articles, by-laws or a unanimous member agreement, or
• restraining any person from acting in breach of them.

Note: In Quebec, a mandatary is an individual or a body corporate that has the power to represent another person according to a mandate contract. In provinces other than Quebec, the reference would be to an agent. In addition, the term sequestrator, in Quebec, is used to reflect civil law concepts. In provinces other than Quebec, the term receiver is used to reflect common law concepts.

Examples of situations in which such an order might be sought include the corporation failing to call anannual meeting of members as required under the NFP Act, or a soliciting corporation failing to have more than three directors on its board.

d. Court Ordered Liquidation and Dissolution on Application of a Member – A member can apply to the court for an order liquidating and dissolving a corporation or any of its affiliates if the court is satisfied that certain specified grounds exist (refer to section 224 of the NFP Act). This could include situations where an act or omission of the corporation is oppressive or unfairly prejudicial to, or unfairly disregards the interests of any member, or where the court is satisfied that it is just and equitable that the corporation should be liquidated and dissolved. A faith-based defense is also available to religious corporations.

7. Dispute Resolution

The NFP Act is silent on how disputes between members, or between a group of members and the directors, can be resolved (refer to section 158 and part 16 of the NFP Act). A corporation might wish to address this issue by providing a mechanism in its by-laws for resolving disputes between members. Possible dispute resolution mechanisms include:

• information exchange
• non-binding mediation
• and binding arbitration.

The corporation will need to decide what mechanism is best suited to its particular circumstances, taking into consideration such matters as the purposes of the corporation, its activities and the size and type of membership.

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About Northfield

Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

Forward-Looking Information

This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information.

This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure to finalize negotiations concerning the increase of the Loan or to close such transaction and the failure of the Company to complete the acquisition of the Company Facility; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company’s activities; and the other risks disclosed under the heading “Risk Factors” and elsewhere in the Company’s amended annual information.

Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

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NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Northfield & Associates professionals will be pleased to discuss resolutions to specific legal concerns you may have.

A charity applying to provide entrepreneurial and employment training would be approved by the CRA for charity registration, that it relieves unemployment.

An organization that provides entrepreneurial training can give instruction to eligible beneficiaries on various topics, such as

• preparing a business plan
• how to obtain financing
• maintaining books and records
• preparing financial statements
• developing marketing and
• understanding government regulations.

Eligible beneficiaries for activities that relieve or prevent unemployment can include disabled, unemployed, or soon-to-be unemployed individuals who need help.

Activities that relieve unemployment of individuals who are unemployed or facing a real prospect of imminent unemployment and are shown to need assistance may be charitable if they directly further one or more of the charitable purposes. Examples of activities that relieve unemployment include:

• Providing employment-related training;
• Providing career counseling;
• Providing assistance with resumes or preparing for job interviews; and
• Establishing lists of available jobs.

Helping individuals who are underemployed to get a new job can be a charitable activity when it can be shown to further a charitable purpose, such as relieving poverty or relieving conditions associated with a disability. When the emphasis is on helping employers recruit employees, this does not further a charitable purpose due to the delivery of a more than incidental private benefit to the employers.

To demonstrate that the charity will carry out these types of employment-related and entrepreneurial training activities in a charitable manner, the charity application should include all of the following information:

• the eligible beneficiaries of its entrepreneurial or employment-related training programs
• provide the selection criteria and process
• details such as the structure, the frequency and schedule
• how it selects the eligible beneficiaries and determines that these individuals are in need of such training
• the qualifications of the individuals who will provide the training
• the associated costs of the training

‍

Using a cheque exchange to turn a donation of services into a gift that can be receipted

Here is a note from CRA on cheque exchanges for Canadian registered charities.

Policy Commentary

Release Date
March 29, 2000

Reference Number
CPC – 017

Subject
Official donation receipts – Whether gifts of services qualify as charitable donations

Purpose

To clarify the Directorate’s policy regarding gifts of services.
Commentary

1. The Income Tax Act currently permits a registered charity to issue official donation receipts for income tax purposes for donations that legally qualify as gifts.

2. Contributions of services, that is, of time, skills or efforts, are not property, and therefore they do not qualify as gifts for purposes of issuing official donation receipts. Accordingly, a charity cannot issue an official donation receipt for services rendered free of charge.

3. A charity may issue an official donation receipt if a person provides a service to the charity, the charity pays for the service, and the person then returns the payment to the charity as a gift. In such circumstances, two transactions have taken place, the first being the provision of a service and the payment flowing therefrom, and the second being a gift proper.

4. The parties should be advised to proceed by way of an exchange of cheques. This ensures the presence of an audit trail, as the donor must account for the taxable income that would be realized either as remuneration (in which case the charity may also be required to issue a T4 slip) or as business income.

5. A charity should not issue an official donation receipt to a service-provider in exchange of an invoice marked “paid”. While this procedure does establish an audit trail, it raises questions as to whether in fact any payment has been transferred from the charity to the service-provider which in turn is being gifted back to the charity.

References
• Gifts and Official Donation Receipts, IT-110.
• Income Tax Technical News, Issue 26.

Source (Canadian Charity Law)

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian law and can help ensure your organization follows proper procedures.

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We’re often asked by prospective clients what our Bookkeeping service. People want to know what specific tasks we do, and what their responsibility is. This brief explainer page will answer that question. This is by no means an exhaustive list, but covers the most frequently asked questions.

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• Review your existing books for needed corrections or back-work
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We do not offer bill-pay services at this time, nor do we manage Accounts Payable (AP) or Accounts Receivable (AR).

Payroll tax responsibility

Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

*Payroll deductions and benefits

We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data.  We do not assist in state registrations, benefits, or advise on deductions.  Those service areas are provided directly by either QBO or Gusto.

Preparation of W2s

Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

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We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

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We cannot provide administrative services unrelated to our bookkeeping function.

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Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

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Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

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Forward-Looking Information

This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information.

This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure to finalize negotiations concerning the increase of the Loan or to close such transaction and the failure of the Company to complete the acquisition of the Company Facility; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company’s activities; and the other risks disclosed under the heading “Risk Factors” and elsewhere in the Company’s amended annual information.

Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

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NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Northfield & Associates professionals will be pleased to discuss resolutions to specific legal concerns you may have.

What Are the Requirements for Registering a Not-for-Profit Business Name in Canada?

In Canada, when starting a not-for-profit organization, one of the critical steps is registering the organization’s name. This process ensures that the name is both unique and legally compliant. Whether you’re operating at the federal or provincial level, business name registration can be complex, and it’s crucial to understand the rules and guidelines to avoid delays or legal issues. This article will cover everything you need to know about registering a not-for-profit name in Canada.

Why Is Business Name Registration Important for Not-for-Profits?

Registering your not-for-profit’s name is essential for several reasons:

1. Legal Protection: Registration helps protect your organization from potential name conflicts. By securing a unique name, other businesses or organizations cannot use the same name, reducing confusion.
2. Brand Identity: Your organization’s name is part of its brand. A clear, registered name ensures that the public can easily recognize and trust your organization.
3. Compliance with Regulations: Both federal and provincial governments require not-for-profits to register their names as part of the incorporation process.

Key Considerations in Choosing a Name

Before registering your not-for-profit’s name, there are a few things to consider:

1. Uniqueness: The name must be distinctive and not identical to any other registered business in your jurisdiction. This includes variations that sound the same but are spelled differently.
2. Legal Restrictions: Your chosen name must comply with federal and provincial regulations. Some words, such as “bank,” “trust,” or “insurance,” may require additional approval.
3. No Misleading Terms: The name should not be misleading or suggest an affiliation with government bodies unless authorized.
4. Bilingual Requirements: In some provinces, especially in bilingual regions like Quebec, you may need to ensure the name works in both English and French.

The Process of Registering a Not-for-Profit Name in Canada

The steps to register a not-for-profit business name differ slightly depending on whether you’re registering federally or provincially. Below are the general processes for both:

Federal Registration

If you plan to operate your not-for-profit across Canada, federal registration is recommended. Here’s how to register your name federally:

• Search the NUANS Database: Before registering, conduct a search on the NUANS (Newly Upgraded Automated Name Search) database. This ensures your proposed name is unique.
• Apply for Name Approval: After confirming the name’s availability, submit a name approval request to Corporations Canada.
• Filing for Incorporation: Once the name is approved, file your incorporation documents, including your name, bylaws, and board of directors’ information.
• Final Registration: Once all documents are approved, Corporations Canada will issue a certificate of incorporation, officially registering your not-for-profit.

Provincial Registration

If your not-for-profit operates only within one province, you’ll need to register your name provincially. Here’s the general process:

• Business Name Search: Each province has its database for business name searches. Check this to ensure your name isn’t already in use.
• Name Approval: Submit the name for approval through your province’s corporate registry office.
• Filing Incorporation Documents: Similar to federal incorporation, you must submit documents outlining your organization’s structure, including its name, purpose, and governance.
• Certificate of Incorporation: Once the documents are processed, the provincial government will issue a certificate of nonprofit incorporation.

Post-Registration Steps

After successfully registering your not-for-profit’s name, there are a few additional steps to take:

1. Register for Taxes: Depending on the nature of your organization, you may need to register for a Business Number (BN) and file for tax exemptions.
2. Trademark Protection: While registering a business name protects it from being used by others in your jurisdiction, it may be worth trademarking your name to offer broader protection across Canada.
3. Maintain Compliance: Not-for-profits are required to file annual returns and ensure that their records are up-to-date. Any changes to the organization’s name, directors, or structure must be reported.

Real-Life Example of Name Registration

Let’s consider a real-life scenario to illustrate the process. Imagine a group of volunteers forming a not-for-profit organization called “Hopeful Hearts Ontario,” which will offer mental health services to teenagers in Ontario.

1. Step 1: They conduct a name search through Ontario’s business registry to ensure “Hopeful Hearts Ontario” is available.
2. Step 2: The group submits an application for name approval, which is granted after confirming that there are no conflicts.
3. Step 3: After receiving approval, the volunteers complete and submit the necessary incorporation documents.
4. Step 4: Once the documents are processed, “Hopeful Hearts Ontario” receives a certificate of incorporation, and the group can officially operate under that name.

Common Mistakes to Avoid During Registration

While registering a not-for-profit name might seem straightforward, several common mistakes can cause issues:

1. Skipping the Name Search: Failing to search for existing names can result in delays if your chosen name has already been taken.
2. Not Considering Trademarks: Registering a business name doesn’t automatically grant trademark rights. If you want exclusive rights across the country, consider trademarking your name.
3. Ignoring Provincial Rules: Each province has unique regulations regarding not-for-profit names. Ensure you comply with both federal and provincial rules, especially if you’re operating locally.

Registering a not-for-profit’s business name in Canada is an essential step in setting up a legal, recognizable organization. Whether operating provincially or federally, ensure you follow the appropriate steps for name searches, approvals, and incorporation. By doing so, you’ll protect your organization’s identity and avoid legal issues in the future.

Understanding Not-for-Profit Business Names in Canada

Not-for-profit organizations operate as separate legal entities under the Canada Not-for-profit Corporations Act. Their naming requirements differ from regular businesses and registered charities.

These organizations serve purposes beyond making a profit and have distinct legal status and operational rules.

Key Characteristics of Not-for-Profits

Not-for-profit corporations are independent legal entities, separate from their members and directors. They operate under the Canada Not-for-profit Corporations Act at the federal level.

They cannot distribute profits to members or directors. Any surplus funds must stay within the organization to support its purposes.

Not-for-profits can engage in activities such as:

• Community services
• Arts and culture promotion
• Educational programs
• Sports and recreation
• Professional associations

Legal structure requires a board of directors and formal governance processes. We must maintain proper records and file annual returns with the federal government.

Naming requirements often include terms like “Association,” “Centre,” “Foundation,” “Institute,” or “Society” for numbered names.

Differences Between Not-for-Profits and Charities

Not all not-for-profits qualify as registered charities under Canadian tax law. Charitable status requires approval from the Canada Revenue Agency and limits activities to charitable purposes only.

Registered charities can issue tax receipts for donations, while not-for-profits without charitable status cannot.

Purpose restrictions differ. Charities must focus on specific purposes such as relief of poverty or advancement of education.

Not-for-profits have broader flexibility and can engage in advocacy, political activities, and member services that charities cannot.

Tax treatment also varies. Charities receive automatic tax exemptions, while not-for-profits may pay taxes on some income.

Common Types of Not-for-Profit Organizations

Professional associations represent trades or professions, such as medical associations and legal societies.

Community service organizations address local needs through food banks, housing services, and social programs.

Arts and cultural organizations promote creative expression through museums, theatre companies, and music groups.

Sports and recreation clubs organize athletic and recreational activities, promoting healthy lifestyles and community engagement.

Educational institutions include private schools, training centres, and research organizations outside the public system.

Religious organizations serve spiritual communities and may operate as not-for-profits for governance purposes.

Steps to Register a Not-for-Profit Business Name

The registration process has three main steps: searching for name availability, requesting approval, and preparing the necessary documents. Each step needs careful attention to ensure your organization meets legal requirements.

Conducting a Name Search

Start by checking if your chosen name is available and unique. This prevents conflicts with existing organizations and saves time.

For federal registration, use the NUANS database to search all registered business names in Canada. Make sure your name doesn’t match or closely resemble any existing corporations.

For provincial registration, search the province’s business registry. Each province, like Ontario or British Columbia, has its own database.

Key search criteria include:

• Exact name matches
• Similar sounding names
• Names with different spellings but the same pronunciation
• Names in both official languages where required

Prepare backup names in case your first choice is unavailable. This speeds up the process.

Submitting a Name Approval Request

After confirming your name is available, submit a formal approval request to the relevant authority. Federal corporations apply through Corporations Canada, while provincial ones use their provincial registry.

The application includes your proposed name and a brief description of your organization’s purpose. Pay the required fee, which varies by jurisdiction.

Processing times differ. Federal requests often take 2-4 weeks, while provincial applications may be faster or slower.

You will receive either approval or rejection. If rejected, you can appeal or choose a different name.

Document Preparation and Filing

After name approval, prepare your articles of incorporation and supporting documents. These articles establish your corporation and include your approved name, purpose, and structure.

You must designate a registered office address in Canada. This address serves as your official mailing address for legal documents and government correspondence.

Required documents typically include:

• Articles of incorporation
• Initial directors list
• Registered office address
• Organizational bylaws

File these documents with the incorporating authority and pay the filing fee. Federal incorporation goes through Corporations Canada, while provincial incorporation uses the provincial registry.

Once approved, you receive a certificate of incorporation. You can then hold your organizational meeting to elect officers and adopt bylaws.

Key Legislation and Regulatory Bodies

Three main laws and government bodies control not-for-profit name registration in Canada. The Canada Not-for-profit Corporations Act sets the basic rules, and the Income Tax Act affects tax status and naming requirements.

Canada Not-for-profit Corporations Act Overview

The Canada Not-for-profit Corporations Act became law on October 17, 2011. It replaced the old Canada Corporations Act.

This Act sets the rules for creating and running federal not-for-profit corporations. It covers how you must choose and register your organization’s name.

Key naming requirements under the Act include:

• Names must be unique and not conflict with existing corporations
• Names cannot mislead people about what the organization does
• Names cannot suggest government connections without approval
• Certain restricted words like “bank” or “insurance” need special permission

The Act requires you to search the NUANS database before applying for name approval. This database shows all registered business names in Canada.

You must also follow specific naming formats. Federal not-for-profit names often end with words like “Corporation,” “Corp.,” “Incorporated,” or “Inc.”

Income Tax Act Implications

The Income Tax Act affects your naming choices if you want charitable status. This law sets rules for organizations that want to be registered charities.

Charitable organizations must have names that clearly show their charitable purpose. Names cannot mislead people about the organization’s activities or goals.

The Act requires charitable names to:

• Reflect the organization’s actual charitable work
• Avoid commercial-sounding terms that suggest profit-making
• Not imply government endorsement without authorization

If you plan to register as a charity, consider these naming rules early. Changing a registered name later costs money and takes time.

The Canada Revenue Agency reviews charitable applications under this Act. They can reject applications if names don’t meet their standards.

Role of Corporations Canada

Corporations Canada is the federal government office that handles not-for-profit incorporation. Submit all federal name registration applications through this office.

This office reviews proposed names and approves or rejects them. They check names against their database and federal naming rules.

Corporations Canada’s main duties include:

• Processing name approval requests
• Maintaining the corporate registry database
• Issuing certificates of incorporation
• Handling annual filing requirements

The office provides online tools for name searches and applications. Most name approvals take several business days to process.

You can appeal Corporations Canada’s decisions if they reject your proposed name. The office also handles name changes for existing corporations.

Tax Registration and Charitable Status

Not-for-profit organizations must register with the Canada Revenue Agency to operate legally. Organizations that want to issue tax receipts for donations need charitable registration and must meet ongoing requirements.

Requirement for Tax Registration with CRA

All not-for-profit organizations must register with the Canada Revenue Agency for tax purposes.

This registration is separate from charitable status and applies to all organizations, regardless of their charitable goals.

We need to complete basic tax registration even if our organization doesn’t plan to seek charitable status.

The CRA requires this registration to track organizational activities and ensure compliance with tax laws.

Key registration requirements include:

• Legal incorporation documents
• Organizational governing documents
• Description of planned activities
• Financial information and projected budgets

The registration process usually takes several weeks.

We must provide accurate information about our organization’s structure, leadership, and intended operations.

Organizations that do not register properly may face penalties or legal issues.

The CRA uses this information to determine our tax obligations and eligibility for various programs.

Obtaining Charitable Registration

Charitable registration allows organizations to issue official donation receipts and receive certain tax benefits.

This process is more complex than basic tax registration and requires meeting strict requirements.

We must show that our organization meets specific criteria under the Income Tax Act.

Our purposes must be exclusively charitable and fit into one of four categories: relief of poverty, advancement of education, advancement of religion, or other purposes beneficial to the community.

Main requirements for charitable registration:

• All purposes must be charitable at law
• Activities must further charitable purposes
• Organization must provide public benefit
• Proper governance structure must exist
• Compliance with anti-terrorism legislation

The application process now uses an online form through the My Business Account portal.

We need to submit detailed information about our activities, beneficiaries, and organizational structure.

Required documentation includes:

• Governing documents (articles and bylaws)
• Detailed activity descriptions
• Financial projections
• Board member information

The CRA review process can take 6-12 months or longer for complex applications.

Issuance of Official Donation Receipts

Only registered charities can issue official donation receipts that donors can use for tax deductions.

This privilege comes with strict rules and responsibilities that we must follow carefully.

We must issue receipts that meet specific CRA requirements.

Receipts must include our registration number, donor details, and donation amount.

Mandatory receipt information:

• Charity’s registered name and address
• Charity registration number
• Receipt serial number
• Date of donation and receipt issuance
• Donor’s name and address
• Donation amount

We can only issue receipts for eligible donations.

Payments for goods or services, membership fees, or other non-gift transactions generally do not qualify for receipts.

The CRA regularly audits donation receipt practices.

Organizations that do not follow proper procedures may lose their charitable status or face penalties.

We must keep detailed records of all donations and receipts issued.

These records must be available for CRA review and maintained for specific time periods as required by law.

Accessing Funding and Financial Assistance

Not-for-profit organizations in Canada can access various government grants and financial assistance programs after completing business name registration.

We need to understand the eligibility requirements and application processes to secure funding for our newly registered organizations.

Eligibility for Government Grants

Government grants are available to registered not-for-profit organizations that meet specific criteria.

We must show that our organization serves a public purpose and operates for charitable, educational, or community benefit.

Federal eligibility requirements typically include:

• Valid incorporation under federal or provincial legislation
• Charitable registration status (for certain programs)
• Clear mission statement aligned with government priorities
• Financial accountability measures in place

Provincial programs often have additional requirements.

We need to show our organization addresses community needs in areas like health, education, social services, or environmental protection.

Many grants require us to have operated for a minimum period.

Some programs accept new organizations, while others require at least one year of operational history.

Applying for Government Funding

The application process varies by funding program and government level.

We should start by researching available opportunities through official government websites and funding databases.

Key application components include:

• Detailed project proposals
• Organization financial statements
• Board member information
• Community impact assessments
• Budget breakdowns and timelines

Federal applications often go through Corporations Canada or specific department portals.

Provincial applications use dedicated funding platforms like Transfer Payment Ontario.

We must submit applications before posted deadlines.

Review periods can take several months, so we should plan accordingly.

Supporting documents must be current and properly formatted.

Incomplete applications are usually rejected without review.

Financial Assistance for Newly Registered Not-for-Profits

New organizations have access to startup funding and capacity-building programs designed for emerging not-for-profits.

These programs help newly registered organizations establish operations.

Common assistance types include:

• Startup grants for operational costs
• Capacity-building funding for staff training
• Equipment and technology grants
• Professional development support

We can access loans and credit facilities designed for not-for-profit organizations.

These often have better terms than commercial lending options.

Many provinces offer mentorship programs paired with financial assistance.

These help us develop governance structures and financial management systems.

Community foundations and United Way chapters also provide funding for new organizations.

We should explore both government and private funding sources to maximize our opportunities.

Conclusion

Registering a not-for-profit business name in Canada requires careful planning and attention to detail.

The process involves conducting thorough name searches, ensuring compliance with federal and provincial regulations, and completing the right incorporation documents.

Each step is important for protecting your organization’s identity and legal standing.

From choosing a unique name to filing the necessary paperwork, following the correct procedures helps avoid delays and legal issues.

Ready to register your not-for-profit organization? 

Contact Northfield & Associates for expert guidance through the registration process.

Our experienced team can help ensure your organization meets all legal requirements and gets started on the right path.

• Email us at info@northfield.biz
• Call (416) 317-6806
• Visit https://www.northfield.biz/
• Schedule a FREE consultation today to get started.

Frequently Asked Questions

Registration costs vary by province and level of incorporation.

Processing times depend on whether you file federally or provincially, with most applications taking several weeks.

How much does it cost to register a nonprofit organization in Canada?

Federal incorporation costs $200 online or $250 on paper. Provincial fees vary: Ontario charges $155 online, BC charges $100 online. Additional costs include name searches ($20-$30) and optional legal help ($500-$2,000).

How long does it take to register a non-profit in Canada?

Federal incorporation takes 10-15 business days, while provincial times vary. Ontario takes 15-20 days, BC takes 5-10 days for online submissions. Name approval adds 3-5 days.

What qualifies as a non-profit in Canada?

Organizations must operate exclusively for non-profit purposes with no personal benefit to members. They must serve public benefit while being allowed to employ staff and generate revenue supporting their mission.

What is a dba business name?

DBA means “doing business as” – a trade name different from your legal corporate name. In Canada, these business names are used for marketing while maintaining one legal identity.

How do you copyright a business name in Canada?

Business names cannot be copyrighted. Use trademark registration instead, which costs $330 per category, takes 12-18 months, and provides broader protection.

What are the four categories of Canadian nonprofits?

The four categories are charitable organizations (can issue tax receipts), public foundations (multiple funding sources), private foundations (family/corporate funded with stricter rules), and other nonprofits (clubs and associations that are tax-exempt).

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Working with Our Firm

In this evolving economic landscape, collaboration with our firm offers clients a strategic advantage. With Cambodia’s reform-driven investment environment and Canada’s expanding footprint in Southeast Asia, our team of experienced consultants and legal advisors provides tailored guidance to help businesses navigate cross-border opportunities. We focus in developing comprehensive legal strategies, structuring international partnerships, and ensuring compliance in emerging markets.

By leveraging our regional insight and international expertise, you benefit from a trusted partner dedicated to helping you capitalize on growth potential in Cambodia and beyond.

At Northfield & Associates are focus in Foreign Direct Investment (FDI), international trade missions, and cross-border legal strategy. Our team of experienced consultants and legal advisors offers tailored guidance and strategic insight to help you navigate the complexities of international partnerships and development opportunities.

Whether you choose to meet in person at one of our offices or connect virtually, we provide flexible and accessible consultation options. During your session, we’ll assess your goals, review key documentation, and guide you through every stage of your FDI or trade mission engagement.

Let us help you take the next step with confidence supported by trusted legal and strategic counsel every step of the way.

Take the First Step Today

If you believe you may be eligible for legal relief or simply need sound legal advice, we’re here to help. Contact us today to book your consultation. Let us provide the clarity, strategy, and peace of mind you need to move forward.

We serve our clients in English, Cambodian, Vietnamese, Mandarin and Cantonese, especially in Asian clients.

• If you or anybody that you know, think that you meet the requirements and wish to receive further information.
• We can help you start the application process and confirm eligibility requirements to participate.
• We Offer Consultations & Meetings by Phone & Virtually. Affordable Fees.

---

About Northfield

Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

Forward-Looking Information

This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information.

This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure to finalize negotiations concerning the increase of the Loan or to close such transaction and the failure of the Company to complete the acquisition of the Company Facility; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company’s activities; and the other risks disclosed under the heading “Risk Factors” and elsewhere in the Company’s amended annual information.

Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

Questions?

info@northfied.biz

Within Corporate Newsroom  

Media Contact:

media@northfied.biz

Press contact 

PR consultants
press@northfied.biz

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Northfield & Associates professionals will be pleased to discuss resolutions to specific legal concerns you may have.

What Is ONCA and How Does It Affect Ontario Nonprofits and Charities?

If you run a nonprofit or charity in Ontario, you’ve probably heard of ONCA. But what exactly is it, and what does it mean for your organization?

In this blog post, we’ll explain:

• What does ONCA stand for
• What it means for nonprofits and charities
• The difference between ONCA and CNCA
• What has changed under ONCA
• What to do if you missed the October 2024 compliance deadline

What Does ONCA Mean?

ONCA stands for the Ontario Not-for-Profit Corporations Act. It’s the law that governs most nonprofit organizations and charities incorporated in Ontario.

ONCA came into effect on October 19, 2021. Before that, nonprofits in Ontario were governed by an outdated law from the 1950s. ONCA was created to modernize the rules, make things clearer, and give nonprofits more flexibility.

What Is the Purpose of ONCA?

The goal of ONCA is to:

• Give members stronger rights
• Make it easier to incorporate a nonprofit
• Provide clear rules for governance
• Allow certain nonprofits to skip full audits and use a review engagement instead
• Clarify when nonprofits can make money from business activities

Does ONCA Apply to Your Organization?

ONCA only applies to nonprofits and charities that are incorporated in Ontario.

If your organization is federally incorporated, then you’re governed by the Canada Not-for-Profit Corporations Act (CNCA) not ONCA. This is true even if your head office is registered in Ontario or have extra-provincial registration in Ontario.

What’s the Difference Between CNCA and ONCA?

Here’s a simple breakdown of the differences:

feature	ONCA (Ontario)	CNCA (Federal)
Applies to	Ontario-incorporated nonprofits	Federally-incorporated nonprofits
Regulated by	Ontario Government	Government of Canada
Filing location	Ontario Business Registry	Corporation Canada
Suitable for	local or Ontario-based organizations	National or multi-province organizations
Key legislation	Ontario Not-for-Profit Corporations Act	Canada Not-for-Profit Corporations Act

Some nonprofits are considering moving from ONCA to CNCA if they operate across provinces or prefer the federal rules. This process is called “continuance.”

What Changed Under ONCA?

ONCA introduced several new rules. If your organization is incorporated in Ontario, these changes apply to you:

• Clear membership structures must be stated in your Articles
• Electronic and proxy voting are now allowed
• Member proposals at meetings are permitted
• Employees can serve as directors
• Directors don’t have to be members
• Default rules for quorum and voting at meetings
• New rules for Public Benefit Corporations
• Flexible financial reporting (you may not need a full audit, and audit threshold requirements are significnicanly higher)
• Directors must give written consent to serve
• Minimum and maximum terms for directors

These changes are designed to make nonprofit governance more efficient and transparent.

How Do I Become ONCA Compliant?

To become ONCA-compliant, your organization must:

1. Review your governing documents (Letters Patent, bylaws, etc.)
2. Update your bylaws to match ONCA’s rules
3. Amend your Articles of Incorporation if needed
4. Get board and member approval for the changes
5. File the updated documents with the Ontario government

It’s best to do this with the help of an Ontario lawyer experienced in charity and nonprofit law generally and with ONCA legislation in particular.

What If You Missed the ONCA Deadline?

The deadline to comply with ONCA was October 18, 2024. If you haven’t updated your documents yet, your organization is now legally non-compliant.

This can create serious problems:

• Your bylaws may no longer be valid
• Board decisions could be challenged
• You may lose out on grants or funding
• Members may raise legal concerns

The good news: It’s not too late to fix it.

We help nonprofits and charities:

• Review their documents
• Update their bylaws and Articles
• Regain full compliance with ONCA

Need Help With ONCA Compliance?

Our team of charity lawyers have helped hundreds of Ontario nonprofits and charities update their documents, stay compliant with ONCA and all relevant provincial and federal legislation, and where prudent, transition to federal incorporation.

Call us at: +1 (416) 317-6806

Email: info@northfield.biz.ca

Frequently Asked Questions

Here are answers to common questions about ONCA and what it means for Ontario nonprofits and charities.

What is ONCA in Ontario?

ONCA is the Not-for-Profit Corporations Act, 2010. It is the law that governs how nonprofit corporations operate in Ontario. ONCA replaced the old Corporations Act and brought new rules for nonprofits to follow.

What is the purpose of ONCA?

ONCA updates and modernizes the rules for nonprofit organizations in Ontario. Its purpose is to make governance clearer, protect members’ rights, and help nonprofits run more effectively. The law sets standards for how boards operate and how organizations make decisions.

What are the new rules for nonprofit organizations in Ontario?

ONCA brought several new rules. Organizations must update their bylaws and governing documents. Boards have clearer duties and responsibilities. Members have more rights, including better access to information. There are also new rules about meetings, voting, and financial transparency.

What does ONCA stand for?

ONCA stands for the Ontario Not-for-Profit Corporations Act. The full name is the Not-for-Profit Corporations Act, 2010.

What is ONCA’s mission?

ONCA itself doesn’t have a mission since it is a law, not an organization. However, the goal of ONCA is to create a modern legal framework for nonprofits. It aims to improve governance, increase transparency, and make it easier for nonprofit organizations to serve their communities effectively.

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian law and can help ensure your organization follows proper procedures.

Get professional support today

Email info@northfield.biz

Phone (416) 317-6806

Visit us https://www.northfield.biz/

 Appointment Schedule your free consultation 

To discuss your specific circumstances and receive expert assistance throughout the reinstatement process with our experienced legal team.

READY FOR BETTER NONPROFIT REPORTING?

At Northfield & Associates, we have a team of professional bookkeepers and accountants to help your organization manage the books so that you can breeze through tax season.

GET IN TOUCH

What We Do!

We’re often asked by prospective clients what our Bookkeeping service. People want to know what specific tasks we do, and what their responsibility is. This brief explainer page will answer that question. This is by no means an exhaustive list, but covers the most frequently asked questions.

Getting Started

• Review your existing books for needed corrections or back-work
• Chart of accounts setup or amendment
• Assistance with setting up bank feeds
• Limited assistance* with setting up payroll (QBO or Gusto only)
• Your books brought current and reconciled if needed

Ongoing Monthly Bookkeeping

• After-the-fact transaction recording
• Post to general ledger
• Post to other ledgers (as needed)
• Bank account reconciliation
• Monthly financial statements
• Other bookkeeping services, as required
• Best-practice bookkeeping advice and counsel

Year End

• Assistance with 1099-NEC preparation*
• Assistance with 1099-MISC preparation*
• Year-end financial statements and period-end closing

What We Don’t Do

Pay bills

We do not offer bill-pay services at this time, nor do we manage Accounts Payable (AP) or Accounts Receivable (AR).

Payroll tax responsibility

Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

*Payroll deductions and benefits

We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data.  We do not assist in state registrations, benefits, or advise on deductions.  Those service areas are provided directly by either QBO or Gusto.

Preparation of W2s

Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

Donation recording

We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

Administrative tasks

We cannot provide administrative services unrelated to our bookkeeping function.

Attend board meetings

Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

Let’s Collaborate & Make a Difference!

Partner with us to amplify your mission. Whether it’s Charity accounting, financial transparency, or strategic growth—we’re here to help you create meaningful impact. Let’s work together to build a better future!

Book a Call

Contact us today to schedule your free consultation.

Working with Our Firm

In this evolving economic landscape, collaboration with our firm offers clients a strategic advantage. With Cambodia’s reform-driven investment environment and Canada’s expanding footprint in Southeast Asia, our team of experienced consultants and legal advisors provides tailored guidance to help businesses navigate cross-border opportunities. We focus in developing comprehensive legal strategies, structuring international partnerships, and ensuring compliance in emerging markets.

By leveraging our regional insight and international expertise, you benefit from a trusted partner dedicated to helping you capitalize on growth potential in Cambodia and beyond.

Book a Consultation with Northfield & Associates

Your Trusted Partner in International Bilateral Relations

At Northfield & Associates are focus in Foreign Direct Investment (FDI), international trade missions, and cross-border legal strategy. Our team of experienced consultants and legal advisors offers tailored guidance and strategic insight to help you navigate the complexities of international partnerships and development opportunities.

Whether you choose to meet in person at one of our offices or connect virtually, we provide flexible and accessible consultation options. During your session, we’ll assess your goals, review key documentation, and guide you through every stage of your FDI or trade mission engagement.

Let us help you take the next step with confidence supported by trusted legal and strategic counsel every step of the way.

Contact us today to schedule your free consultation.

Northfield & Associates

Advancing Global Partnerships, Together.

Take the First Step Today

If you believe you may be eligible for legal relief or simply need sound legal advice, we’re here to help. Contact us today to book your free consultation. Let us provide the clarity, strategy, and peace of mind you need to move forward.

We serve our clients in English, Cambodian, Vietnamese, Mandarin and Cantonese, especially in Asian clients.

• If you or anybody that you know, think that you meet the requirements and wish to receive further information.
• We can help you start the application process and confirm eligibility requirements to participate.
• We Offer Consultations & Meetings by Phone & Virtually. Affordable Fees.

BOOK A CONSULTATION TODAY

Contact Northfield & Associates today to schedule a consultation with an experienced Consultant.

BOOK A CALL WITH A CONSULTATION

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Northfield & Associates is a Canadian consulting firm based in Toronto, Canada. Northfield & Associates specializes in all types of immigration matters, from spousal sponsorships to refugee board appeals. With over eight (8) years of experience and an excellent success rate, Northfield & Associates is recognized as one of Canada’s premier immigration consulting firm.

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The purpose of the Free Assessment is to assess whether you are qualified to apply for permanent residence in Canada under the Family Sponsorship, Skilled Worker, or Business Class categories. Please choose which category you would like to be assessed under and complete all fields in the form. We will endeavor to complete your assessment and provide you with a reply within one business day. There is no charge for this service. All information provided will be kept strictly confidential. If our assessment indicates that you are qualified for immigration to Canada, we will contact you to provide further information about our services and fees. Start Your Immigration Application!

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About Northfield

Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

NORTHFIELD & ASSOCIATES in Canada

As a global consulting firm, Northfield & Associates helps clients with total transformation, driving complex change, enabling organizations to grow, and driving bottom-line impact.

 Learn about our offices in Canada, read our latest thought leadership, and connect with our team.

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Forward-Looking Information

This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information.

This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure to finalize negotiations concerning the increase of the Loan or to close such transaction and the failure of the Company to complete the acquisition of the Company Facility; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company’s activities; and the other risks disclosed under the heading “Risk Factors” and elsewhere in the Company’s amended annual information.

Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

Questions?

info@northfied.biz

Within Corporate Newsroom  

Media Contact:

media@northfied.biz

Press contact 

PR Secretary
press@northfied.biz

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Northfield & Associates professionals will be pleased to discuss resolutions to specific legal concerns you may have.

What is ONCA’s position on members’ access to a not-for-profit’s financial statements?

Financial transparency is a cornerstone of good governance in Ontario’s not-for-profit sector. The Ontario Not-for-Profit Corporations Act (ONCA) provides clear rules about when and how members can access their organization’s financial statements.

Understanding these requirements helps nonprofits maintain compliance while building trust with their members. This article explores the ONCA Section 98 and what it means for both organizations and their members.

Understanding the Ontario Not-for-Profit Corporations Act (ONCA)

ONCA is the primary legislation governing how not-for-profit corporations operate in Ontario. It sets out the legal framework that nonprofits must follow to remain compliant.

What is ONCA?

The Ontario Not-for-Profit Corporations Act is provincial legislation that regulates not-for-profit corporations in Ontario. It replaced the previous Corporations Act and introduced modern governance standards for the nonprofit sector.

ONCA came into effect on October 19, 2021. The legislation applies to most nonprofits incorporated in Ontario, including charities, membership organizations, and public benefit corporations.

The Act covers everything from incorporation and bylaws to governance, meetings, and financial accountability. Its purpose is to modernize nonprofit governance and make it easier for organizations to operate effectively.

Why Financial Transparency Matters

Financial transparency creates accountability between nonprofit boards and their members. When members can review financial statements, they can make informed decisions about the organization’s direction.

Access to financial information builds trust and confidence in leadership. Members who understand their organization’s financial position are more likely to remain engaged and supportive.

Transparency also serves a legal purpose. ONCA requires nonprofits to maintain certain standards of openness with their membership. Organizations that fail to provide required access may face legal consequences.

ONCA Section 98: Financial Statement Access Requirements

Section 98 of ONCA establishes the specific rules for financial statement access. This section balances the organization’s operational needs with members’ rights to information.

Overview of Section 98

Section 98 creates mandatory requirements for retaining and providing access to financial statements. These rules apply to not-for-profit corporations incorporated under ONCA.

The section covers several key areas:

• Where financial statements must be kept
• Who can access them and when
• Whether organizations can charge fees
• How technology can facilitate access
• Circumstances where access might be restricted

Understanding Section 98 helps nonprofit boards establish compliant policies. It also helps members know their rights when requesting financial information.

Corporation’s Obligation to Retain Financial Statements

Every ONCA corporation must maintain proper financial records at its principal office. This requirement ensures that documents are available when members request access.

What Must Be Kept on File (Section 98(1))

Section 98(1) requires corporations to keep copies of specific financial statements at their principal office. This includes the organization’s own financial statements as well as those of any subsidiaries.

The corporation must also maintain financial statements of any combined corporate body. These documents must be readily accessible during the organization’s regular business hours.

The principal office is typically the address listed in the organization’s public filings. This is where members should go to inspect financial documents in person.

Key documents that must be retained:

• The corporation’s annual financial statements
• Financial statements of subsidiary corporations
• Combined financial statements of corporate bodies
• Any audited or review engagement reports

Organizations should establish a clear system for storing these documents. Digital storage is acceptable as long as members can access the information as required by law.

Members’ Rights to Inspect Financial Statements

ONCA grants members specific rights to view and copy their organization’s financial information. These rights cannot be restricted by bylaws or board policies.

Free Access During Regular Office Hours (Section 98(2))

Section 98(2) states that members can examine financial statements free of charge during the corporation’s regular office hours. The organization cannot impose fees for this basic inspection right.

Members also have the right to make copies or take extracts from the financial statements. This allows members to retain information for their own records or analysis.

Regular office hours means the times when the organization’s administrative office is typically open. Many nonprofits operate with limited office hours, so members should confirm availability before visiting.

Members’ inspection rights include:

• Viewing complete financial statements
• Taking notes or photographs
• Making photocopies or extracts
• Requesting digital copies at no charge
• Accessing statements during any regular business hours

The organization cannot require members to provide reasons for requesting access. The right to inspect is automatic for all members in good standing.

What “Members” Means Under ONCA

Under ONCA, a “member” is someone who has membership rights as defined in the corporation’s bylaws. Membership typically involves voting rights and the ability to participate in members’ meetings.

Not all nonprofits have members. Some organizations operate with a board-only structure and do not have a formal membership base.

For organizations with members, the bylaws should clearly define who qualifies for membership. This might include individuals who pay dues, meet certain criteria, or are appointed to membership.

Only persons holding a valid membership at the time of the request can exercise inspection rights. Former members generally cannot access financial statements unless the bylaws specifically allow it.

Remote and Electronic Access to Financial Statements

ONCA recognizes that technology makes it easier to share information with members. The Act permits electronic access as an alternative to in-person inspection.

Online Access Options (Section 98(2.1))

Section 98(2.1) allows corporations to provide remote access to financial statements through electronic means. This might include secure member portals, email distribution, or document-sharing platforms.

Organizations can choose whether to offer remote access. It is an option, not a mandatory requirement. However, many nonprofits find that electronic access makes compliance easier and more convenient for members.

Common methods for remote access:

• Secure member portals on the organization’s website
• Email distribution of PDF financial statements
• Cloud-based document sharing services
• Video conferencing for virtual inspection appointments

Technology-based access must be reasonably secure and user-friendly. Organizations should not create barriers that effectively prevent members from accessing information.

No Charges for Remote Access (Section 98(2.2))

Section 98(2.2) prohibits charging fees for electronic access to financial statements. Just as in-person inspection must be free, remote viewing cannot involve member costs.

This means organizations cannot require paid memberships to premium website areas where financial statements are stored. Basic access to financial information must always be free.

However, organizations may charge reasonable photocopying fees if members request physical copies by mail. The Act distinguishes between viewing access (which must be free) and reproduction costs (which may be recovered).

Nonprofits should consider offering financial statements in multiple formats. Providing both PDF downloads and paper copies upon request serves members with different preferences and technology access.

Court Applications to Restrict Access

While ONCA creates a strong presumption in favour of member access, it recognizes that some circumstances might warrant restrictions. The Act provides a legal process for limiting access when necessary.

When Can a Corporation Limit Access?

A corporation may apply to court under Section 98(3) for an order preventing a member from examining financial statements. This application must demonstrate that allowing inspection would be harmful to the corporation or related entity.

The bar for obtaining such an order is high. Courts generally favour transparency and will only restrict access in exceptional circumstances.

Potential grounds for restricting access might include:

• The member plans to use information for commercial gain unrelated to membership
• Inspection would reveal confidential business strategies to competitors
• The request is part of a harassment campaign against the organization
• Disclosure would violate privacy rights of third parties

The corporation must file its court application within 15 days of receiving the member’s access request. If the organization misses this deadline, it cannot later seek to prevent inspection based on that particular request.

Court applications should be a last resort. Most member requests can and should be accommodated without legal intervention.

Notification Requirements (Section 98(4))

Section 98(4) requires the corporation to notify the member if it applies to court for an order restricting access. This notification must inform the member about the application and their right to participate in the court proceeding.

The member has the right to appear in court and be heard on the matter. They may present arguments in person or through legal counsel.

This notification requirement ensures fairness in the process. Members can defend their right to access information and respond to the corporation’s concerns.

Organizations must provide sufficient notice to allow meaningful participation. Waiting until the day before a court hearing would not satisfy the notification requirement.

Exception for Subsidiary Corporations

ONCA includes a practical exception for subsidiary corporations to avoid duplication of effort. This streamlines compliance for nonprofit groups with complex corporate structures.

When Subsidiaries Are Exempt (Section 98(5))

Section 98(5) states that subsidiary corporations do not need to comply with the financial statement access requirements if their financial information is already consolidated in the parent corporation’s statements. This exception prevents unnecessary administrative burden.

For the exemption to apply, the subsidiary’s financial information must be included in the holding corporation’s consolidated statements. Members can then access the complete picture by reviewing the parent organization’s documents.

Requirements for the subsidiary exemption:

• The subsidiary must be wholly owned or controlled by the parent corporation
• Financial statements must be properly consolidated
• Members must have access to the consolidated statements
• The consolidation must comply with applicable accounting standards

This exemption makes sense because members can see the subsidiary’s financial position through the consolidated statements. Requiring separate access to subsidiary records would be redundant.

However, if a member specifically requests to see the subsidiary’s standalone statements, the holding corporation should consider whether providing them would promote transparency. While not legally required, voluntary disclosure often builds goodwill.

Practical Implications for Ontario Not-for-Profits

Understanding the legal requirements is one thing, but implementing them effectively requires practical planning. Nonprofits should develop clear policies and procedures for managing member access requests.

Best Practices for Compliance

Organizations should create a straightforward process for members to request financial statement access. This might include designating a staff member or volunteer to handle requests and establishing a response timeline.

Recommended practices include:

• Posting financial statements proactively on the organization’s website
• Maintaining organized digital and physical filing systems
• Responding to access requests within 5-7 business days
• Providing statements in the member’s preferred format when possible
• Training staff and board members on ONCA requirements

Proactive disclosure often eliminates the need for individual requests. Many nonprofits automatically provide financial statements to all members after the annual general meeting.

Creating a members’ section on the organization’s website can streamline access. Upload approved financial statements promptly after board approval.

Board policies should outline the process for handling access requests. Include details about who receives requests, how quickly responses are provided, and what formats are available.

Common Mistakes to Avoid

Some nonprofits inadvertently violate ONCA requirements by creating barriers to access. Understanding common pitfalls helps organizations maintain compliance.

Mistakes that can cause problems:

• Charging fees for basic inspection or viewing
• Requiring members to submit written requests with justifications
• Imposing unreasonable delays before providing access
• Offering access only during inconvenient hours
• Failing to maintain proper records at the principal office

Another common error is confusing member access rights with public disclosure. While members have broad access rights, nonprofits are not required to share financial statements with the general public unless they are registered charities.

Some boards mistakenly believe they can restrict access through bylaw provisions. However, ONCA rights cannot be eliminated or significantly limited by corporate bylaws.

Organizations should review their current practices against ONCA requirements. Any policies that conflict with Section 98 should be revised immediately.

Conclusion

ONCA Section 98 establishes clear requirements for member access to not-for-profit financial statements, promoting transparency and accountability throughout Ontario’s nonprofit sector. If your organization needs guidance on implementing proper financial statement access policies or navigating ONCA compliance, B.I.G. Charity Law Group can help.

Our experienced team provides practical legal advice on nonprofit governance, member rights, and regulatory compliance.

Schedule a FREE consultation and let us help you build a transparent, compliant organization that strengthens member confidence.

Frequently Asked Questions

These common questions help clarify how ONCA’s financial statement access rules work in practice.

Can a not-for-profit charge members to view financial statements?

No. ONCA explicitly prohibits charging fees for members to inspect or view financial statements. This applies to both in-person inspection and remote electronic access.

Organizations may charge reasonable photocopying costs if members request physical copies. However, the inspection itself must always be free.

How quickly must a nonprofit provide access to financial statements?

ONCA does not specify an exact timeline. However, access must be provided during regular office hours, which implies reasonable promptness.

Best practice is responding to requests within 5-7 business days. Organizations should not create unnecessary delays that effectively deny access.

What if a member wants copies of several years’ worth of statements?

Members can request access to multiple years of financial statements if the organization retains them. ONCA does not limit requests to the most recent year.

However, nonprofits are only required to maintain statements for the periods specified in their record retention policies. Most organizations keep financial statements for at least seven years.

Can financial statements be provided in digital format only?

Yes. Organizations can provide financial statements exclusively through electronic means if they wish. Members cannot insist on physical paper copies for free.

However, nonprofits should ensure digital access does not create barriers. If a member cannot access electronic documents, the organization should find an alternative solution.

What happens if a not-for-profit refuses to provide access?

A member can apply to court to compel the organization to provide access. Courts take ONCA’s transparency requirements seriously and typically order compliance.

The member may also be entitled to recover legal costs if the organization’s refusal was unreasonable. Persistent non-compliance could result in penalties for the organization.

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

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Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

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For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

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Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

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